Elliot Cooper has advice for those who want to go from two staff to two hundred, and it all starts with your business systems.
Most of the successful businesses that I see have one common element: they have business systems that can readily scale up to serve a much larger company.
In practical terms, they have an operational plan focused on the next year and a strategic plan looking further into the future – usually at least five years.
When you are commercialising an idea, part of the business plan is to put business systems in place that can grow with the business as it progresses from start-up.
So that’s my first golden rule for growth: get your business systems in place early.
I have found that doing this makes it easier to raise capital or debt to fund business growth. If a liquidity event (like the possible sale of your business) presents itself that you want to take advantage of, it makes it easier to transition from entrepreneur to the new structure. This removes the need for long lock-in times, enabling you to exit the business cleanly.
Raising money to expand your business is easier with sound business systems because they help demonstrate to investors and financiers that you are a risk worth taking. When investors and financiers – including banks – set the rate of return they expect, they will want a larger return for evaluating the business risk. Good systems can provide them with the information they need. You are more likely to obtain the funds at a lower rate.
Good systems pay off in other ways too. They help you manage the throughput of the business and reduce the chance of ‘dropping the ball’. Few of us have photographic memories. It’s important to have data stored that can be recalled and have triggers built into the business system that prompts us to take the next action. This might be dispatching the order that the customer has paid for. Or a trigger to call a prospect on a certain date to follow up on a proposal sent today.
Attracting a buyer for your business
If you sell your business, good business systems will help ensure you get the best price. Buyers see your business as more attractive and less risky, because it’s clear what systems and processes they need to follow to run the business successfully.
When I say ‘good business systems’ I don’t just mean the accounting system. It goes wider than that. I am talking about a system which includes documenting how things are done, from processing an order to the entire sales process. If manufacturing is involved, then the recipes and manufacturing process need to be documented.
Eventually it may be appropriate to get ISO certification. This requires processes to be systemised and documented. ISO accreditation may be a requirement to be part of a supply chain for large corporates or government. This will become even more important when it comes to food traceability, for example.
Preserving your capital
When you choose a financial hub for the business make sure that the application is not just what you need now, but can grow with you. Consider systems from the cloud on a SaaS (software-as-a-service) basis to avoid tying up valuable working capital that you need to grow your business. It’s also possible to get funding on a lease-to-own basis from finance companies.
Most software will work in the cloud. This frees you from the need to invest in servers and the associated costs of maintenance, backup, firewalls etc. One fee to a hosting company can take care of all of that for you if you do not have a SaaS software model.
Some of the larger accounting software providers offer different levels of pricing that is intended to suit businesses as they grow. By moving up the levels more functionality becomes available to the user.
The business needs to have a sound sales process to identify and manage the customers you are looking to target. A Customer Relationship Management (CRM) system is important here. Some basic CRM functionality is often included in an accounting system. This may be sufficient to meet the current requirements of the business, but again think about the goals you are shooting for in five years. Choose an accounting system that readily integrates with EDI, CRM and other applications you will need as you grow.
Playing with the big kids
Electronic Data Interchange (EDI) is becoming more important. It’s a prerequisite for supplying most large retailers and it can reduce your running costs. You want a financial system that is capable of EDI. This includes websites, B2B, B2C, movement of orders, delivery notes and invoices. It may also be that you can obtain better pricing from your suppliers, including freight companies, by utilising EDI with their tracking systems.
Sound business systems are what enable you to work on the business, rather than in it. If your systems and processes are just ‘in your head’ you are not really the business owner – you are the business. You may get along day to day but it’s not a recipe for growth.
You can’t grow a business if it all revolves around you. The right business systems are an important platform for growth.
The 3 golden rules to go from small to big:
- Get your business systems in place early. They will help you attract capital and minimise the cost of that capital.
- Choose financial and other business systems that can scale up as the business grows. You will save time and cost in the long run.
- Choose a financial system that integrates readily with other business applications such as CRM and EDI. When you decide you need them, you can implement with minimal cost and disruption.